Daniel A. Levinthal

Innovation and Learning: The Two Faces of R&D

The authors assume that firms invest in R&D not only to generate innovations, but also to learn from competitors and extraindustry knowledge sources (e.g., university and government labs). This argument suggests that the ease of learning within an industry will both affect R&D spending, and condition the influence of appropriability and technological opportunity conditions on R&D. For example, they show that, contrary to the traditional result, intraindustry spillovers may encourage equilibrium industry R&D investment. Regression results confirm that the impact of appropriability and technological opportunity conditions on R&D is influenced by the ease and character of learning. Copyright 1989 by Royal Economic Society.

A model of adaptive organizational search

A model of organizational change through adaptive search for new technologies is developed and explored. The model is in the tradition of behavioral models of organizational choice and learning associated with work by Winter, Nelson, and Radner, It permits the exploration of simultaneous organizational adaptation in search strategies, competences, and aspirations under conditions of environmental instability and ambiguity. The model exhibits the extent to which variation in organizational behavior and performance reflect the distributional consequences of simple adaptation in ambiguous environments, as well as some adverse consequences of rapid learning.

Role of Individual Attachments in the Dissolution of Interorganizational Relationships

In this study, we propose that changes affecting the resource fit between organizations exchanging resources provide an impetus for the dissolution of their relationships, whereas the individual an...

A survey of agency models of organizations

Abstract In recent years Neoclassical economists have begun to turn their attention to issues of firm organization, stimulated in large part by methodological advances in the economics of incentives and incomplete information. The paradigm on which much of this work is based views an organization as an agency relationship. Agency models incorporate two basic features of organizations: incomplete information and goal conflict among members of the organization. This essay characterizes and critiques the existing research on agency models of organizations in order to broaden the set of consumers of such models and to stimulate the production of new research.

Perspective---Neo-Carnegie: The Carnegie School's Past, Present, and Reconstructing for the Future

Cyert and Marchs (1963) A Behavioral Theory of the Firm and the broader Carnegie School form critical theoretical underpinnings for modern organization studies. Despite its impact, however, we suggest that researchers who rely on the Carnegie School have progressively lost touch with its defining commitment to a decision-centered view of organizations. Decision making has given way to learning, routines, and an increased focus on change and adaptation; the organizational level of analysis, although frequently invoked, has been largely supplanted by either a more micro or a more macro focus. In this paper, we argue for restoring the Schools original mission and perspective. Our proposal for how this overarching goal can be achieved encompasses three central points. First, we believe the School needs to resurrect a few select ideas that, despite their fundamental importance, have been neglected over time. Second, we believe there is a need for greater paradigmatic closure amongst the Schools central theoretical pillars. Loose coupling among such pillars might keep key insights on organizational decision making from emerging. Finally, there is the need to incorporate major developments that have been generated post-Carnegie School, both within organization theory and in the behavioral and social sciences more broadly. In particular, we point to the shift to more open systems perspectives on organizations, the conceptions of organizations being embedded in larger social contexts, and recent developments in the study of individual cognition.

The Behavioral Theory of the Firm: Assessment and Prospects

The Behavioral Theory of the Firm has had an enormous influence on organizational theory, strategic management, and neighboring fields of socio-scientific inquiry. Its central concepts have become ...

Bounded Rationality and the Search for Organizational Architecture: An Evolutionary Perspective on the Design of Organizations and Their Evolvability

We employ a computational model of organizational adaptation to answer three research questions: (1) How does the architecture or structure of complexity affect the feasibility and usefulness of boundedly rational design efforts? (2) Do efforts to adapt organizational forms complicate or complement the effectiveness of first-order change efforts? and (3) To what extent does the rate of environmental change nullify the usefulness of design efforts? We employ a computational model of organizational adaptation to examine these questions. Our results, in identifying the boundary conditions around successful design efforts, suggest that the underlying architecture of complexity of organizations, particularly the presence of hierarchy, is a critical determinant of the feasibility and effectiveness of design efforts. We also find that design efforts are generally complementary to efforts at local performance improvement and identify specific contingencies that determine the extent of complementarity. We discuss the implications of our findings for organization theory and design and the literature on modularity in products and organizations.

The Emergence of Emerging Technologies

What is discontinuous about the moment of radical technological change? Discontinuity typically does not lie in a radical advancement in technology itself; rather, it stems from a shift of an existing technical lineage to a new domain of application. Seeming revolutions such as wireless communication and the Internet did not stem from an isolated technical breakthrough; rather, their spectacular commercial impact was achieved when an existing technology was re-applied in a new application domain. The biological notion of speciation events, which form the basis for the theory of punctuated equilibrium, can reconcile the process of incremental technical change with the radical change associated with the shift of an existing technology to a new application domain. This concept can assist managers to cope with, and potentially exploit, such change processes.

The Dual Role of Modularity: Innovation and Imitation

Modularity has been heralded as an organizational and technical architecture that enhances incremental and modular innovation. Less attention has been paid to the possible implications of modular architectures for imitation. To understand the implications of modular designs for competitive advantage, one must consider the dual impact of modularity on innovation and imitation jointly. In an attempt to do so, we set up three alternative structures that vary in the extent of modularity and hence in the extent of design complexity: nonmodular, modular, and nearly modular designs. In each structure, we examine the trade-offs between innovation benefits and imitation deterrence. The results of our computational experiments indicate that modularization enables performance gains through innovation but, at the same time, sets the stage for those gains to be eroded through imitation. In contrast, performance differences between the leaders and imitators persist in the nearly modular and the nonmodular structures. Overall, we find that design complexity poses a significant trade-off between innovation benefits (i.e., generating superior strategies that create performance differences) and imitation deterrence (i.e., preserving the performance differences). We also examine the robustness of our results to variations in imitation accuracy. In addition to documenting the overall robustness of our principal finding, the ancillary analyses provide a more nuanced rendering of the relationship between the architecture of complexity and imitation efforts.

Hoping for A to Z While Rewarding Only A: Complex Organizations and Multiple Goals

This paper explores the trade-offs inherent in the pursuit and fulfillment of multiple performance goals in complex organizations. We examine two related research questions: (1) What are the organizational implications of pursuing multiple performance goals? (2) Are local and myopic (as opposed to global) goal prioritization strategies effective in dealing with multiple goals? We employ a series of computational experiments to examine these questions. Our results from these experiments both formalize the intuition behind existing wisdom and provide new insights. We show that imposing a multitude of weakly correlated performance measures on even simple organizations (i.e., an organization comprised of independent employees) leads to a performance freeze in that actors are not able to identify choices that enhance organizational performance across the full array of goals. This problem increases as the degree of interdependence of organizational action increases. We also find that goal myopia, spatial differentiation of performance goals, and temporal differentiation of performance goals help rescue organizations from this status quo trap. In addition to highlighting a new class of organizational problems, we argue that in a world of boundedly rational actors, incomplete guides to action in the sense of providing only a subset of underlying goals prove more effective at directing and coordinating behavior than more complete representations of underlying objectives. Management, in the form of the articulation of a subset of goals, provides a degree of clarity and focus in a complex world.